PETALING JAYA: Credit for the purchase of commercial properties in March grew by 22.7% year-on-year, raising concerns in some quarters of a potential asset bubble.
This loan growth in the non-residential sector, which includes industrial and commercial properties, was the highest followed by credit growth for the construction sector at 19.2%.
Meanwhile, loan growth for purchase of residential properties in March had somewhat moderated to 13.9% year-on-year.
“Starting from the end of 2009, there has been a big loan growth in the non-residential sector,'' Pong Teng Siew, head of research, InterPacific Research, said. “The pick-up in loan growth in this sector was evident in the second half of 2009.''
Illustrating the rapid pace of loan growth, the total stock of loans in the non-residential sector has grown from RM70bil in June 2009 to RM116bil currently, or 66%.
“This is faster than for any kind of loans,'' said Pong. “Can this pace of loan growth be sustained?''
“At the moment, demand for non-residential properties is a reflection of the strength of the economy,'' said Pong. “If there is a lot of demand for office space, then the 66% growth would be a reflection of the confidence in take-up.''
However, a note of caution is that projections of strong demand usually lead to overbuilding, and eventually an oversupply situation.
The presence of too many listed property and construction firms also places pressure on the need to grow profits.
“The non-residential sector has grown significantly but the bulk in value is still in residential which comprised 28% of total loans in March,'' said Low Yee Huap, head of research, Hong Leong Investment Bank.
“Meanwhile, non-residential properties made up only 11% of total loans in March.''
Over the past few years, a low interest-rate environment and accumulation of liquidity has encouraged the buying of shophouses and offices, while some high-rise buildings come with commercial titles.
“But if the situation (of rapid loan growth) gets out of hand, it will cause a potential bubble,'' said Low. “There needs to be a balance for healthy growth.”
Recently, there has also been a lot of non-residential launches. Moreover, the purchase of non-residential properties is not subject to the loan-to-value cap.
“It's become a trend now for commercial launches, with smaller commercial units and sohos being built for affordability.
“It is more a matter of market forces and changing of customer preferences,'' said Chan Ken Yew, associate director of Kenanga Investment Bank Bhd and head of its research division.
By The Star
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